Abstract:

In a number of articles Neubauer tried to justify and recommend the use of two formulas, one known as Palgrave's index, the other being the harmonic mean of price relatives where weights are expenditures at base period. The properties of the two formulas are examined in detail. The indices have some noteworthy advantages, and they yield results within the interval spanned by the Paasche and Laspeyres index respectively. There are also some shortcomings, however. The indices violate strict monotonicity and linearity, and they have weaknesses as deflators because the resulting (implicit) quantity indices fail proportionality and hence also identity in the quantities. Neubauer's interpretation in terms of hypothetical quantities and "pure price comparison" also raises some questions. Nonetheless it is totally surprising that these indices are sadly neglected and ignored. They did not receive the attention and appreciation they deserve, whereas Fisher's "ideal" index, though much more deficient in many respects, is generally hailed as unsurpassed "non plus ultra."